The free banking model is unsustainable and increases the likelihood of mis-selling, a report by PwC has claimed.
Steve Davies, retail banking leader at the auditing firm, said banks could soon start charging for services. He said: “Compared to other countries, the UK is an anomaly with the free banking model it has adopted for personal current accounts.
“In other countries, customers expect to pay directly for current accounts in some way, such as ATM charges and monthly fees. As many of us know, UK current accounts are not free at all and are paid for through overdraft charges, penalty fees and uncompetitive or zero rates of interest.”
He added that the free banking model stifles innovation and competition by requiring challenger banks to achieve scale very quickly and failing to reward banks that come up with new ideas.
The 12-page report, There’s No Such Thing as a Free Lunch: Why Fees are the Future for Current Accounts, analysed the results of a survey of 2,000 people.
A clear majority – 66 per cent – were aware of hidden current account charges, but nearly two-thirds said they would not be prepared to pay anything upfront.
Matthew Walne, director of Loughborough-based Santorini Financial Planning, “I think most people now expect to pay for their bank account in some form or another.”